The good news is existing home sales continue to improve as does commercial multi-unit properties. The problem child is the new home and the land market. The land market is tied to new homes. Without new homes being built, there is little demand for land. However, there are niches in the land market that are doing great, in particular, commercially zone land.
As you can see in the graph above, new home starts have yet to make the comeback they once had. Many are wondering if they will ever make a come-back, and with good reason. We now have a whole generation that witnessed the real estate crash affect them or at least many of friends and family as they saw home after home foreclosed on. The effect is they developed a fear of home ownership. Renting becomes their go-to solution. We saw this phenomenon happen with many of our elderly parents with the 1929 market crash and run on banks. I grew up listening to my father telling me that you can’t trust the bank or the stock market. I imagine this generation will say the same thing and add home ownership to that fearful attitude.
So how does a wise investor play this market? Most of the market has already made the come-back and now it’s too late to enter for an appreciation play. Rental cash flow is one area that should remain with us for an entire generation as reasoned above. So buying rentals or apartments has a good long term future. Sure, appreciation will slow down, but that is to be expected for at least the next 10 years in the average market. The real places to be in the market now is in tiny real estate niches. This is a place for the pro’s only. The risks are greater, but the rewards can make it worth the risks. Hopefully, most of you have spent some years building the experience level you need to get you through the coming flat market. If not, you may want to look into teaming up or bringing on a team of experts that know how to work a flat real estate market.
If you have rentals, hold for the long term or sell now at a medium peek in the market. If you own land, sell now and reinvest in a sector that can actually grow. If you own commercial land, now is the time to sell. The apartment market growth will start to slow now that we have returned to a more normal pace.